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Welcome to our Presentation On Credit Management and Financial performance of Islamic Finance and Investment Limited. Objectives. General Objective The prime objective of the report is to “Credit management and financial Performance Evaluation of Islamic Finance and Investment Limited”
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Welcome to our Presentation On Credit Management and Financial performance of Islamic Finance and Investment Limited.
Objectives • General Objective • The prime objective of the report is to “Credit management and financial Performance Evaluation of Islamic Finance and Investment Limited” • Specific Objectives • To identify and assess the impact of the present performance of IFIL • To know the credit management system applied in IFIL • To calculate the financial ratios and identify the areas of concern. • To know their business performance over the year. • To know their products and services • To know the issues that they follow while disbursement • To identify the findings and raise possible recommendations for IFIL.
About Islamic Finance and Investment Ltd Islamic Finance and Investment Ltd. is a financial institution incorporated in Bangladesh on February 27, 2001 as a public ltd. Co. under the company act, 1994. The company obtained its license from BB on April 12, 2001as required under section 4(1) of the financial institution Act, 1993. The company went for public issue in 2005 and its shares are listed in both Dhaka Stock Exchange ltd. and Chittagong Stock Exchange ltd.
Strategic objective • To introduce new products and services with Islamic values through diversification and customization of existing products and services to ensure maximum market coverage. • To provide employees with high motivation, extensive opportunities for learning and career development, competitive pay and benefits and congenial environment where diversify is valued. • To create sustainable economic value for stakeholders. • To conduct business in a socially responsible manner under Islamic principle. • To elevate ethical and business standard with high corporate governance.
Credit Management Credit management is a dynamic field where a certain standard of long-range planning is needed to allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and follow-up are highly required for ensuring the timely repayment and minimizing the default
Principles of Sound Lending • The basic lending criteria can be considered as eight main headings, as follows: • Principle of Safety • Principle of Liquidity • Principle of Purpose • Character and ability of the borrower • Principle of Security • Principle of profitability • Source of repayment • Principle of National Interest
Credit approval system Loan Application Client IFIC Preparation of Proposal by the Credit Officer Continuous Follow up till adjustment Endorsed/ Signed by Branch Credit Committee Disbursement Evaluated by the Head Office Credit Committee Loan Documentation Evaluated By Managing Director Executive Committee: Approves or rejects the proposal Figure: 3.5.1 Credit Appraisal Systems
Dividend Policy The Board of Directors has decided to create a Dividend Equalization Reserve to face uncertain profit growth and to stabilize dividend payment. It was also a demand of the shareholders in the previous AGMs. Therefore, a portion of the profit has been earmarked for this reserve and this will continue in future also. We, however, have tried to give the honourable shareholders as much as possible. After tax provision of Tk. 56.78 lac, our distributable profit stood at Tk. 5.68 crore. The Board of Directors recommends 16% stock dividend for the year 2008 compared to 15% cash dividend for the year 2007. Dividend trend for the last few years is given below:
Findings • They have maintain a strong but lengthy process for granting credit to a particular area of investment • In 2005 the company was in boom condition all the ratios such as ROA, ROE, EPS, P/E shows that better position than any of the year. • Current ratio in 2008 is 1.12:1 which is greater than all previous year. • Capital adequate ratio is decreasing which indicates the bank is being greater risk. • By analyzing previous four years financial data we have found that the company was able to generate more operating revenue than its preceding year but their earnings after tax was reduced by on an average of 1.5% than previous year because of cost amount is increased.
Findings • The ratio between Debt and equity, in 2008, is increased to 3.29:1 which represent that they have Tk. 3.29 debt capital in against of Tk. 1 of equity capital, which is better for its cost of capital but at the same time they are in more risk. • One of the major findings is it can not disburse its sanction money efficiently. • Outstanding investment increased to 261.49 crore at the end of 2008 from 215.18 in 2007 • Their major expense sector is interest paid to deposit holder which is more than 50% of total expenses.
Recommendations • They should reduce their lengthy process in credit granting procedure by maintaining a standard. • Their capital adequacy ratio is decreasing so they should increase it as soon as possible by increasing to optimal equity capital or taking other strategy. • Their current assets are too low to backup the current liability, so they should increase current asset or should reduce the current liability. • They should pay more attention their sanctioning because they can not efficiently disburse its sanction money as result investment can not be placed according to planning.
Recommendations • In consideration of all economic situations in 2008 the business performance of IFIL is satisfactory. But in 2005 it was more than satisfactory, so they should analyze why they could not retain in such position like 2005. • There investment amount was increased in 2008 than any other previous year but there return on investment was not increased because of higher cost associated with the investment appraisal system.
